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Plan to pay process plants to use electricity

7 Jan 2014

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Exclusive: National Grid is considering paying major energy users such as process plants to use electricity at off-peak times.

The January issue of Process Engineering reveals that the grid operator is considering the move as it seeks to tackle the spiralling sums of money it is forced to pay to wind farms to keep their turbines shut down during off-peak hours, typically the middle of the night.

According to data from the Renewable Energy Foundation, these payments, known as constraint payments, had already cost National Grid £27 million in 2013 by the time Process Engineering went to press in mid-December.

This accounted for an effective 315GWh of wind generation shut down because it occurred at a time when there was insufficient demand for the electricity that would be produced, and National Grid is forced to make the payments to balance the system.

[We] are at the very early stages of considering mechanisms and services by which…expensive generator actions could be avoided

National Grid spokesman

As more and more wind farms come online, these payments have rocketed, up from £5.9 million covering 45GWh of constrained generation in 2012. The average price paid per MWh has fallen though, down from £136 in 2012 to £99 last year.

However, £99 per MWh is still more than double the wholesale price of electricity, which is currently trading at around £46 per MWh.

As a result National Grid is exploring the possibility that a “Turn-Up Service” paying users to take electricity off the grid might prove more cost-effective than paying wind farm operators to cease generating.

“The team involved are at the very early stages of considering mechanisms and services by which demands could be time-shifted in such a way that expensive generator actions could be avoided,” said a National Grid spokesman.

National Grid is planning a Demand Side Forum late Spring to “talk more about this and other services” with industry.

However, Process Engineering has learnt from a source close to the discussions that National Grid is already working out the details of how the turn-up service could be rolled out.

This includes National Grid applying to Ofgem’s Network Innovation Competition (NIC) for funding to support the roll-out of technology such as smart meters as part of the turn-up service. Last year’s NIC electricity transmission winners included Scottish Hydro’s project to simulate the impact of high voltage direct current (HVDC) technology, securing £11.3 million.

National Grid is also considering a pilot study covering demand usage from industrial users equivalent to 10MW of electricity generating capacity, which could run as early as the second financial quarter.

“We will reach out to the process industries for that pilot,” said the source.

Processing accounts for 73% of UK industrial energy usage, so process plant owners such as chemicals manufacturers and paper mills are considered key participants for the turn-up service, which would typically run between midnight and 6am.

“It needs to be useful electricity, such as moving when you pump water to holding tanks from mid-afternoon to the middle of the night,” said the source.

“It can’t just be turning on the office lights at night.”

The technology that would be used in the turn-up service would be very similar to the smart meter technology currently being used in schemes where major energy users are asked to cut down their electricity usage at times of peak demand (more on this in the January issue’s cover feature on demand response).

Many process plant owners currently take part in these demand-side schemes through so-called energy “aggregators”, companies that group together businesses’ demand loads and sell them as spare capacity to the grid.

It is understood that National Grid is also considering the possibility of by-passing the pilot study and rolling out the turn-up service through the aggregators and their existing clients as early as possible.

Any firms taking part in the turn-up service would still be required to pay their existing electricity suppliers for electricity used while taking part in the turn-up service at off-peak hours. However, these bills would be offset by payments from National Grid, meaning the firms’ usage would either be free, or they could even potentially earn money from using electricity at these times.